I write on white-collar crime and how seemingly good, smart people are capable of doing the dumbest things. I am also interested in covering the consequences of these crimes and to provide a perspective that is much different than the mainstream stories on crime. Since 2003, I have presented my personal story of white-collar crime to universities, the FBI, various professional societies and corporations around the world. I co-authored "Stolen Without A Gun" with Neil Weinberg, former Executive Editor Forbes Magazine (now Editor at American Banker). On a good day, I'll be writing for Forbes or speaking to a business audience.

5/02/2013 @ 3:15PM7,552 views

Sky Capital's Ross Mandell Has Appeal Heard

On Wednesday, Ross Mandell made his way through security at the Ft. Lauderdale-Hollywood International Airport to fly to New York in preparation for his appeal to have his criminal conviction overturned. In passing through security Mandell had to explain to TSA officers his court-required ankle bracelet and GPS transponder that has tracked his every move following the 5-week trial where he was found guilty of securities fraud and wire fraud on July 26, 2011. Once he explained the devices, he then had to produce documents proving that he could travel to New York for the hearing. And you thought that titanium hip was an issue!

In May 2012 U.S. District Judge Paul Crotty sentenced Mandell, founder of Sky Capital, to 12 years in federal prison and ordered him to report to the federal prison in Petersburg, VA on June 18, 2012. Just two days prior to making that long drive to prison, the 2nd Circuit granted Mandell a reprieve to allow him to remain free on bail while an appeal was pursued. Mandell’s co-defendant, Adam Harrington (sentenced to 5 years in prison), reported to the federal prison camp in Miami where he stayed for a month before also being granted bail pending appeal. There are also four cooperating witnesses who worked at Sky Capital and have pleaded guilty who have had their prison sentencing dates suspended indefinitely … no doubt until Mandell’s fate is determined.

Mandell’s appeal is largely based on the Supreme Court ruling in the case of Morrison v. National Australia BankNational Australia Bank. The argument is that the transactions that the government claimed were fraudulent occurred outside the court’s jurisdiction (outside the United States). Mandell’s Sky Capital offered investors, mostly U.K. residents, a means to buy shares in companies prior to having them trade on the London Stock ExchangeLondon Stock Exchange‘s Alternative Investment Market (AIM). Eventually some of those companies did trade on the AIM with some investors cashing out (profits) while some did not (losses). Throughout the trial, defense attorneys for Mandell (Jeff Hoffman) and Harrington (Michael Bachner) argued that the case should be dismissed based on the Supreme Court ruling on the Morrison case, which was decided in 2010. However, Judge Crotty disagreed by siding with government prosecutors that Morrison related to civil litigation, not the criminal charges that Mandell/Harrington were facing. It should be noted that no British authorities have ever brought charges against Mandell or Sky Capital.

Matthew Brissenden, Mandell’s appellate attorney, was prepared to argue that very point until Judge Richard Wesley said that the decision on Morrison would not be argued today as the case of Alberto Vilar, an appellate case argued last August, had precedent over Mandell’s appeal. Former opera benefactor Alberto Vilar’s appeal was based on whether or not the U.S. had jurisdiction over his investment offering (Panama). Vilar was sentenced to 9 years in federal prison in February 2010 after a jury found him and his co-defendant, Gary Tanaka, guilty. In the appeal, Vilar’s lawyer, Vivian Shevitz, questioned why “victims” seek protection from the government when the purpose of investing outside the US is to circumvent US securities laws and US taxes. Interesting argument. While the 2nd Circuit considers that case, it ordered Vilar and Tanaka to be released from prison pending their decision. Ms. Shevitz was quoted in the NY Times regarding the decision to release the men saying, “It means we have a substantial issue likely to result in reversal.” Mandell and Harrington certainly hope so as well.

With the Morrison decision likely to be out in a few weeks, Mandell’s attorney argued that there were procedural errors at trial which led, misled, the jury to decide to convict. The argument by the government was that Sky Capital was a fraudulent enterprise from its inception and that the eventual trading on the AIM was nothing more than a continuation of a criminal enterprise. At trail, Mandell’s legal team noted extensive legal work, compliance documents, board of directors and that the very structure of Sky Capital represented a legitimate firm. Today, AUSA Katherine Goldstein used only half her allotted time to say that the government had clearly informed the jury that the actions which occurred in another country (U.K.) were merely the continuing actions of fraud that had their roots in the U.S. The 2nd Circuit requested that Goldstein provide proof of a “domestic” transaction between Sky Capital and its investors during the relevant time period. She has until May 8th to provide this information …. an indication that the court wants to get this done.

On November 6, 2006, Sky Capital’s offices in New York were raided by FBI agents, marking the beginning of the end of Ross Mandell’s financial empire. Three years later, he would be formally charged and arrested. In 2011 he was convicted at trial and in May 2012 he was sentenced to 12 years in federal prison. Today, almost a year after his sentencing, Mandell was in the Thurgood Marshall Courthouse in downtown Manhattan hearing his appeal. Who said justice was swift?

Today, the usually outspoken Mandell sat quietly in the front row of the gallery with George T. Conway III, a partner at Wachtell, Lipton who worked on the submission of the Amicus brief submitted by The Association of the Bar of the City of New York in support of reversing Mandell’s conviction.

The Morrison decision should come out before summer, then after that the judges should weigh in on whether the Mandell / Harrington jury was given incorrect jury instructions. In the meantime, Mandell and Harrington resume their lives … in Limbo.

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